By Adedapo Adesanya
Oil futures finished higher, gaining more than three per cent on Monday after a deep plunge last week as investors regained confidence ahead of the United States’ presidential election on Tuesday.
Yesterday, the Brent crude oil went up by 3.22 per cent or $1.22 to $39.16 per barrel while the United States’ futures, West Texas Intermediate (WTI) crude, appreciated by 3.3 per cent or $1.18 to $36.97 a barrel.
The oil market had been under pressure in recent days, hit by concerns about weaker fuel demand as several European countries went into lockdown to curb the coronavirus, worsened by rising cases in the US.
President Donald Trump goes head-to-head against Democratic candidate, Mr Joe Biden, in the election, which has spiked concerns nationwide about disruptions and protests that could come from the results.
According to reports, while the talk of a coronavirus stimulus package had stalled between the Democrat-controlled House of Representatives and the White House, Mr Biden plans to unleash a large government spending programme to combat the effects of coronavirus on the world’s biggest economy.
Although the concerns of weakened demand and oil supply remain the major driver in the long term, the outcome of the election could be crucial to prices in the next few days.
But on Monday, signals that a key ally of the oil cabal, the Organisation of the Petroleum Exporting Countries (OPEC), is in discussions about possibly postponing the group’s planned output hike in January, helped prices of the commodity to rise.
Russian oil companies and Energy Minister, Mr Alexander Novak, discussed the possibility of delaying a planned OPEC+ output increase which indicates that the group won’t add more supply than the market can absorb due to affected demand over renewed lockdowns in Europe.
Countries across Europe including France, Germany, Portugal, the United Kingdom among others have reimposed lockdown measures to try to slow COVID-19 infection rates that have accelerated over the past month.
OPEC+ is now facing an increasingly complicated decision on whether to add more supply to the market when the group meets at the end of the month. The second wave of the virus around the world could push global oil demand to as low 88 to 89 million barrels a day, more than 10 per cent from 2019 levels, according to analysts.
Supply developments in Libya will also raise the possibility that the OPEC+ group will consider a delay to the taper of its planned voluntary output cuts.
OPEC and allies including Russia are cutting output by about 7.7 million bpd to support prices. This OPEC+ group is scheduled to hold a policy meeting on November 30 and December 1, with some analysts expecting a postponement of plans to ramp up output by 2 million barrels daily from January.
Libyan supply stands at about 800,000 barrels per day up more than 100,000 barrels per day and slowly moving closer to a full daily capacity of 1.2 million barrels.
